Vodafone Plc is considering selling a portion of its stake — 7.1% — in Indus Towers to support the Indian entity’s (Vodafone Idea) efforts to strengthen its balance sheet, the company said on Wednesday. Sources said that talks are on with Bharti Airtel to sell 4.7% of the stake.

The total sale of 7.1% could fetch the company something in the range of Rs 4,328 crore-Rs 4,405 crore. Of this, the sale to Bharti could fetch around Rs 2,885-2,936 crore, and the block sale around Rs 1,443-1,469 crore.

”The company is in advanced discussions with one of the largest shareholders in Indus for the purchase of 127.1 million Indus shares from Vodafone, or 4.7% of Indus’ outstanding share capital,” Vodafone Plc said in a statement. The company added that it is also selling 63.6 million primary shares in Indus via blocks, representing 2.4% of Indus’ outstanding share capital.

Vodafone Idea has so far not been able to raise funds from external sources, and therefore, the promoters – Aditya Birla Group and Vodafone Plc – need to put in some equity. Aditya Birla Group holds a 27.66% stake in VIL, while Vodafone Plc holds 44.39%.

In an analyst call after the December quarter results, Vodafone Idea MD and CEO Ravinder Takkar had reiterated that the company expects to complete the fundraise in the current financial year. It has been trying to raise up to Rs 25,000 crore for the last over one year.

Vodafone Plc has in the past said that it would not put in any fresh funds in VIL, so the only way the company can put its share of funds is through the stake sale in Indus Towers. Vodafone Plc holds a 28.12% stake in Indus Towers, while Bharti Airtel holds 41.73%.

Indus Towers shares closed at Rs 251.20 on the BSE on Wednesday.
Vodafone Plc said that of its total 757.8 million shares in Indus Towers, 190.7 million equivalent to 7.1% are pledged to Indus as part of the security arrangements entered into between Vodafone and Indus at the time of the merger of Indus Towers with Bharti Infratel.

The company said that the terms of the agreement are being discussed and there can be no certainty that the sale will proceed. “Should the sale be completed, Vodafone would retain a 21% shareholding,” the statement said. It added that it was also in discussions with “several interested parties in relation to a potential sale of residual shareholding” as well.

Indus Towers is the country’s largest tower infrastructure provider with a portfolio of over 1,84,748 telecom towers across all the 22 telecom circles. It posted a net profit of Rs 1,571 crore during the October-December quarter, up 16% on a year-on-year basis.

Though Vodafone Idea has opted for the government’s four-year moratorium package for payment of spectrum and adjusted gross revenue (AGR) dues, which will provide it cash flow relief, it still needs to raise funds to meet the regular licence fee and spectrum charges, vendor payments, and enhance capex for better 4G coverage.

While Vodafone Idea exited its investment in Indus Towers in 2020, it continues to be tenant in it but has not been able to pay rentals as per the agreement. Indus Towers said in a statement on Wednesday that VIL has committed to pay certain amounts each month till July. “Additionally, to safeguard its interests, the company (Indus Towers) shall also retain the right to invoke the security earlier than July 15 in certain specified events, including but not limited to, in case of VIL’s failure to pay a certain agreed minimum monthly amount. This will help support the company’s (Indus Towers) long-term business interest and improve its receivables and cash flow position in due course.

As per the government’s moratorium package which Vodafone Idea has opted for, at the end of the four-year period, the government will become the single-largest shareholder in the company with a stake of 38.5%. This is because the company has opted for converting the interest on AGR and spectrum dues into government equity.

The loss-making and financially constrained Vodafone Idea, which is the country’s third-largest telecom operator, has total AGR dues of Rs 58,254 crore, of which it has paid Rs 7,854 crore.

Its annual instalments before the government’s relief package amounted to Rs 15,000 crore for spectrum and Rs 9,000 crore for AGR, which came to a total of Rs 96,000 crore for four years.

Vodafone Idea’s net loss widened to Rs 7,234 crore on a quarter-on-quarter during the October-December period on the back of higher operating expenses. The company’s revenues during the quarter were up 3.3% on a sequential basis to Rs 9,717 crore.

The company’s total gross debt (excluding lease liabilities and including interest accrued but not due) as of December 31, 2021, stood at Rs 1.9 lakh crore. Its cash balance stood at Rs 1,500 crore.